The mechanisms regulating community composition and local dominance of trees in species-rich forests are poorly resolved, but the importance of interactions with soil microbes is increasingly acknowledged. Here, we show that tree seedlings that interact via root-associated fungal hyphae with soils beneath neighbouring adult trees grow faster and have greater survival than seedlings that are isolated from external fungal mycelia, but these effects are observed for species possessing ectomycorrhizas (ECM) and not arbuscular mycorrhizal (AM) fungi. Moreover, survival of naturally-regenerating AM seedlings over ten years is negatively related to the density of surrounding conspecific plants, while survival of ECM tree seedlings displays positive density dependence over this interval, and AM seedling roots contain greater abundance of pathogenic fungi than roots of ECM seedlings. Our findings show that neighbourhood interactions mediated by beneficial and pathogenic soil fungi regulate plant demography and community structure in hyperdiverse forests.